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Are Pricier Houses Less Risky? Evidence from China

Author

Listed:
  • Jianhua Gang

    (Renmin University of China)

  • Liang Peng

    (The Pennsylvania State University)

  • Jinfan Zhang

    (Chinese University of Hong Kong (Shenzhen))

Abstract

Houses are the largest component of most households’ wealth and their risk is important. Recent research shows that pricier houses have lower price appreciation risk. This relationship can be due to competing reasons: risk is related to the price level, or risk is related to location-related features that are reflected in prices. This paper disentangles these two relationships by analyzing condo data from China with a special feature: Condos in the same subdivision have identical location but different prices. Our results indicate that larger and pricier condos are less risky than smaller ones in the same location. Furthermore, for condos with the same size, those with higher price per square meter are less risky. These results seem to indicate that pricier houses are less risky not due to location-related features that are reflected in prices.

Suggested Citation

  • Jianhua Gang & Liang Peng & Jinfan Zhang, 2021. "Are Pricier Houses Less Risky? Evidence from China," The Journal of Real Estate Finance and Economics, Springer, vol. 63(4), pages 662-677, November.
    • Handle: RePEc:kap:jrefec:v:63:y:2021:i:4:d:10.1007_s11146-020-09792-3
    DOI: 10.1007/s11146-020-09792-3
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    More about this item

    Keywords

    Housing; Risk segmentation;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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